Monday, September 8, 2014
You can add one simple idea to your "trader's toolbox" today... and dramatically increase your odds of success...
Mind the overall trend.
Trends are one of the most important concepts in all of trading. A trend is simply a series of price movements in one general direction. Some trends go up. Some trends go down.
When stocks are in a big, multiyear uptrend, you should keep most of your trades on the "long" side – the bullish side.
That will ensure you're trading with the trend, not against it... It will ensure the trend will provide a tailwind to your trades, not a headwind... And it will ensure you don't panic out of stocks when they suffer a small correction.
And today's trend is UP...
Since early 2009, the benchmark S&P 500 Index has nearly tripled. But it hasn't gone straight up... It has pulled back dozens of times...
Take last month, for example. From late July to early August, the S&P 500 dropped nearly 4%. The week ending July and starting August was the worst week for the index since 2012.
Bearish commentators were quick to call the next crash. But we told you to keep the overall trend in mind. Here's what I wrote on August 11, just after the bottom...
As you can see from the chart below, the S&P 500 has more than recovered from its recent selloff. It's up around 4.5% since its lows in early August. Last week, it hit a new all-time high.
In sum, the trend is up. The "big picture" bull market is still in place. And the best odds are still on the long side.
This all might sound too basic to make for an important idea... But many smart, experienced investors ignore the simple, powerful fact that the overall trend is up. They have many sophisticated arguments for avoiding stocks. They'll cite unemployment, bad government policies, interest rates, and a dozen other factors. Instead of profiting from the trend, they analyze themselves out of hundreds of thousands of dollars.
Don't make that mistake.
Of course, the trend won't continue higher forever. Eventually, stocks will enter a bear market. When they do, having a catastrophe-prevention plan will protect your capital. But until then, mind the current trend. And stay bullish.
Amber Lee Mason
Amber says, in the market, we're often our own "worst enemies." The average investor's annual returns are "way on the losing end, past even inflation." So what can you do to be better than average? Find out here.
"It's the best kind of problem to have: You've doubled your money," Amber writes. If you've invested in this great bull market, you may be facing this "problem." Now, you have a decision to make. Learn how to handle this type of scenario right here.
Home-improvement stocks continue their uptrend... Sherwin-Williams and Home Depot rise 25%-plus over the past year.
Discount retailers soar... Costco Wholesale breaks out to a 52-week high.
Transportation sector fund IYT hits a new high... shares are up 20%-plus over the past seven months.
Big euro fund FXE falls to a three-month low.